I have the same problem with my 3 year old DSC W5 and brought it to a Sony Service Center earlier today and was advised that I will be charged a cost of $150 for lens replacement plus $50 for labor.
After joining this forum I tried the different suggestions posted before me. I tried whaking it with my hand, whaking it on the table & even dropping it on the carpeted floor. I even tried waving it vigorously like a magic wand. All this resulted with the lens struggling to come out. After turning the power on and testing it the same problem came back after turning it off and on again.
I was about to give up thinking that I could have caused more damage with the internal mechanism with the abuse I had already inflicted on it. On my last try I bounced it left and right on my bed while holding on with the strap and guess what....it worked.
I may have a sore arm right now but at least I'm not $200 poorer.
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